Walker & Dunlop(WD) - 2025 Q2 - Quarterly Results

Financial Highlights Walker & Dunlop achieved significant Q2 2025 growth in transaction volume, revenues, and net income, though adjusted EBITDA and core EPS declined due to non-cash MSR income, with year-to-date trends showing similar patterns Second Quarter 2025 Highlights Q2 2025 saw significant growth in transaction volume, revenues, and GAAP net income, driven by a commercial real estate market rebound, despite declines in adjusted EBITDA and adjusted core EPS due to non-cash MSR income Q2 2025 Key Financial Metrics | Metric | Q2 2025 | vs. Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Transaction Volume | $14.0 billion | $8.5 billion | +65% | | Total Revenues | $319.2 million | $270.7 million | +18% | | Net Income | $34.0 million | $22.7 million | +50% | | Diluted EPS | $0.99 | $0.67 | +48% | | Adjusted EBITDA | $76.8 million | $80.9 million | -5% | | Adjusted Core EPS | $1.15 | $1.23 | -7% | - The increase in net income and diluted EPS was largely driven by a non-cash increase in the fair value of expected net cash flows from servicing (MSR income), which is excluded from adjusted EBITDA and adjusted core EPS[1] - CEO Willy Walker noted the company is gaining market share and broadening its capabilities into hospitality, data centers, and Europe, capitalizing on the start of a new commercial real estate investment cycle[2] - The Board of Directors declared a dividend of $0.67 per share for the third quarter of 2025[1] Year-to-Date 2025 Highlights Year-to-date 2025 results show a 41% increase in transaction volume and 12% revenue growth, with modest gains in net income and diluted EPS, but significant declines in adjusted EBITDA and adjusted core EPS YTD 2025 Key Financial Metrics | Metric | YTD 2025 | vs. YTD 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Transaction Volume | $21.0 billion | $14.8 billion | +41% | | Total Revenues | $556.6 million | $498.7 million | +12% | | Net Income | $36.7 million | $34.5 million | +6% | | Diluted EPS | $1.07 | $1.02 | +5% | | Adjusted EBITDA | $141.8 million | $155.1 million | -9% | | Adjusted Core EPS | $2.00 | $2.39 | -16% | Consolidated Second Quarter 2025 Operating Results Q2 2025 consolidated results show a 65% surge in transaction volume, boosting revenues and GAAP net income, with the servicing portfolio growing to $137.3 billion, though credit metrics indicate increased defaulted loans Transaction Volumes Q2 2025 total transaction volume surged 65% to $14.0 billion, driven by a 68% increase in debt financing, including a 106% rise in Fannie Mae volume and a 51% increase in property sales Q2 2025 Transaction Volumes (in thousands) | Category | Q2 2025 | Q2 2024 | % Variance | | :--- | :--- | :--- | :--- | | Fannie Mae | $3,114,308 | $1,510,804 | 106% | | Freddie Mac | $1,752,597 | $1,153,190 | 52% | | Brokered | $6,335,071 | $3,852,851 | 64% | | Total Debt Financing Volume | $11,638,225 | $6,917,718 | 68% | | Property Sales Volume | $2,313,585 | $1,530,783 | 51% | | Total Transaction Volume | $13,951,810 | $8,448,501 | 65% | - GSE (Fannie Mae and Freddie Mac) debt financing volume collectively increased by 83% year-over-year, driving market share gains to 11.4% year-to-date, up from 10.3% in 2024[7] - A large $941 million Fannie Mae loan portfolio refinancing contributed to the volume growth but generated lower margins, which are expected to continue into the second half of 2025[7] Managed Portfolio The total managed portfolio grew 4% to $156.0 billion as of June 30, 2025, with the servicing portfolio reaching $137.3 billion and assets under management increasing 6% to $18.6 billion Managed Portfolio as of June 30, 2025 (in thousands) | Category | Q2 2025 | Q2 2024 | % Variance | | :--- | :--- | :--- | :--- | | Total Servicing Portfolio | $137,349,124 | $132,777,911 | 3% | | Assets under management | $18,623,451 | $17,566,666 | 6% | | Total Managed Portfolio | $155,972,575 | $150,344,577 | 4% | - The company added $4.6 billion of net loans to its servicing portfolio over the past 12 months, led by Fannie Mae loans[12] - Over the next two years, $10.9 billion of Agency loans (9% of the portfolio) are scheduled to mature, presenting a significant refinancing opportunity[12] Key Performance & Credit Metrics Q2 2025 performance showed 50% net income growth and an expanded operating margin, but adjusted EBITDA declined 5%, while the at-risk servicing portfolio grew to $65.4 billion and defaulted loans increased 123% to $108.5 million Q2 2025 Key Performance Metrics | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Walker & Dunlop net income | $34.0M | $22.7M | | Adjusted EBITDA | $76.8M | $80.9M | | Diluted EPS | $0.99 | $0.67 | | Operating margin | 15% | 10% | | Return on equity | 8% | 5% | Q2 2025 Key Credit Metrics | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | At-risk servicing portfolio | $65.4B | $60.1B | | Defaulted loans | $108.5M | $48.6M | | Defaulted loans as % of at-risk portfolio | 0.17% | 0.08% | - As of June 30, 2025, there were eight at-risk loans in default with an aggregate unpaid principal balance of $108.5 million, compared to five loans totaling $48.6 million a year prior[18] - A provision for credit losses of $1.8 million was recorded in Q2 2025, mainly related to an updated reserve for a previously defaulted loan and portfolio growth[18] Second Quarter 2025 Financial Results by Segment Q2 2025 saw the Capital Markets segment drive growth with 46% revenue increase and 211% operating income surge, while Servicing & Asset Management revenues declined 5%, and the Corporate segment's net loss widened 28% Capital Markets The Capital Markets segment achieved strong Q2 2025 performance, with total revenues increasing 46% to $172.8 million and operating income more than tripling to $45.4 million, driven by higher origination fees and MSR income Capital Markets Financial Results (in thousands) | Metric | Q2 2025 | Q2 2024 | % Variance | | :--- | :--- | :--- | :--- | | Total revenues | $172,791 | $118,170 | 46% | | Income from operations | $45,427 | $14,611 | 211% | | Walker & Dunlop net income | $33,142 | $11,039 | 200% | | Adjusted EBITDA | $1,323 | $(8,532) | -116% | - The increase in origination fees was driven by higher overall debt financing volume, particularly the 81% increase in Agency volume, though the origination fee rate declined from 0.95% to 0.82% due to competitive pressures and a large, lower-margin transaction[23] - Personnel expense rose 26% due to higher variable compensation from increased transaction volume, a 5% increase in headcount, and severance costs[23] Servicing & Asset Management Servicing & Asset Management revenues decreased 5% to $140.7 million in Q2 2025, as a 4% rise in servicing fees was offset by significant drops in investment management and placement fees, leading to a 21% decline in operating income to $43.0 million Servicing & Asset Management Financial Results (in thousands) | Metric | Q2 2025 | Q2 2024 | % Variance | | :--- | :--- | :--- | :--- | | Total revenues | $140,735 | $148,232 | -5% | | Income from operations | $42,966 | $54,372 | -21% | | Walker & Dunlop net income | $37,541 | $40,432 | -7% | | Adjusted EBITDA | $111,931 | $124,502 | -10% | - Investment management fees decreased due to a reduced accrual from LIHTC funds, reflecting fewer expected asset dispositions and challenging market dynamics[26] - Placement fees and other interest income declined due to a lower average placement fee rate driven by lower short-term interest rates[26] Corporate The Corporate segment's net loss widened 28% to $36.7 million in Q2 2025, with total expenses increasing 6% to $47.7 million, primarily due to an 11% rise in personnel costs from increased headcount Corporate Financial Results (in thousands) | Metric | Q2 2025 | Q2 2024 | % Variance | | :--- | :--- | :--- | :--- | | Total revenues | $5,714 | $4,274 | 34% | | Income (loss) from operations | $(42,019) | $(40,786) | 3% | | Walker & Dunlop net income (loss) | $(36,731) | $(28,808) | 28% | | Adjusted EBITDA | $(36,443) | $(35,039) | 4% | - The increase in personnel costs was driven by higher salaries and benefits from an 8% increase in average segment headcount and an increase in expense from the deferred compensation plan[28] Year-to-Date 2025 Operating Results Year-to-date 2025 consolidated results show 41% transaction volume growth and 12% revenue increase, leading to 6% net income growth, but adjusted EBITDA and core EPS declined due to lower-margin fees and higher personnel expenses, with mixed segment performance YTD Consolidated Performance Year-to-date consolidated performance shows total transaction volume up 41% to $21.0 billion and revenues up 12% to $556.6 million, with net income growing 6% to $36.7 million, despite declines in adjusted EBITDA and core EPS due to fee pressures and higher personnel costs YTD 2025 Consolidated Results (in thousands, except per share) | Metric | YTD Q2 2025 | YTD Q2 2024 | % Variance | | :--- | :--- | :--- | :--- | | Total transaction volume | $20,987,742 | $14,842,960 | 41% | | Total revenues | $556,607 | $498,735 | 12% | | Walker & Dunlop net income | $36,706 | $34,529 | 6% | | Adjusted EBITDA | $141,777 | $155,067 | -9% | | Diluted EPS | $1.07 | $1.02 | 5% | | Adjusted core EPS | $2.00 | $2.39 | -16% | - The increase in transaction volume was driven by a 61% increase in Agency debt financing, a 24% increase in brokered debt financing, and a 54% increase in property sales volume[33] YTD Financial Results by Segment Year-to-date segment results were mixed, with Capital Markets revenues growing 38% and achieving a $50.0 million profit, while Servicing & Asset Management revenues declined 6%, and the Corporate segment's operating loss increased 8% to $78.1 million Capital Markets Year-to-date, Capital Markets revenues grew 38% to $275.4 million, leading to a substantial improvement in operating income to $50.0 million and a 718% surge in net income to $35.5 million YTD Capital Markets Financial Results (in thousands) | Metric | YTD Q2 2025 | YTD Q2 2024 | % Variance | | :--- | :--- | :--- | :--- | | Total revenues | $275,361 | $200,067 | 38% | | Income from operations | $49,968 | $6,281 | 696% | | Walker & Dunlop net income | $35,502 | $4,339 | 718% | - Origination fees increased 29% due to a 39% rise in debt financing volume, though the origination fee rate tightened from 0.90% to 0.84% due to competition and transaction mix[38] Servicing & Asset Management Year-to-date, Servicing & Asset Management revenues declined 6% to $272.6 million, as growth in servicing fees was offset by significant drops in investment management and placement fees, resulting in a 26% fall in operating income to $79.7 million YTD Servicing & Asset Management Financial Results (in thousands) | Metric | YTD Q2 2025 | YTD Q2 2024 | % Variance | | :--- | :--- | :--- | :--- | | Total revenues | $272,638 | $289,467 | -6% | | Income from operations | $79,714 | $107,643 | -26% | | Walker & Dunlop net income | $56,667 | $83,715 | -32% | - The decrease in investment management fees was primarily due to fewer expected asset dispositions in the LIHTC funds, while lower placement fees resulted from lower short-term interest rates[41] Corporate Year-to-date, the Corporate segment's net loss widened 4% to $55.5 million, with total expenses increasing 7% to $86.7 million, primarily due to a 10% rise in personnel costs from increased headcount YTD Corporate Financial Results (in thousands) | Metric | YTD Q2 2025 | YTD Q2 2024 | % Variance | | :--- | :--- | :--- | :--- | | Total expenses | $86,672 | $81,249 | 7% | | Income (loss) from operations | $(78,064) | $(72,048) | 8% | | Walker & Dunlop net income (loss) | $(55,463) | $(53,525) | 4% | - The increase in personnel expense was primarily due to higher salaries and benefits associated with a 7% increase in average segment headcount[43] Capital Sources and Uses The company declared a $0.67 per share Q3 2025 dividend and maintains an active $75.0 million share repurchase program, though no shares have been repurchased as of June 30, 2025 Dividends and Share Repurchases The Board declared a $0.67 per share dividend for Q3 2025, and a $75.0 million share repurchase program remains authorized, with no repurchases made as of June 30, 2025 - A dividend of $0.67 per share for Q3 2025 was declared, payable on September 5, 2025, to shareholders of record as of August 21, 2025[45] - A $75.0 million share repurchase program is authorized through February 2026, with no shares repurchased under this program as of June 30, 2025[46] Additional Information and Financial Statements This section covers corporate disclosures, definitions of non-GAAP financial measures, forward-looking statement disclaimers, and includes unaudited condensed consolidated financial statements with supplemental operating and credit data, along with GAAP to non-GAAP reconciliations Non-GAAP Financial Measures and Forward-Looking Statements This section details the company's use of non-GAAP financial measures like adjusted EBITDA and adjusted core EPS to supplement GAAP figures, alongside a standard safe harbor statement for forward-looking statements Financial Statements and Supplemental Data This appendix contains unaudited condensed consolidated financial statements, including balance sheets and income statements, supplemental tables for operating and credit data, and detailed reconciliations of GAAP to non-GAAP financial measures